SAFE Lending Act Filed to Stop End-Run Around State Law

Many online lenders think they are immune to state laws - The Stopping Abuse and Fraud in Electronic Lending Act of 2013 (SAFE Lending Act) aims to change that.

Internet payday loans are illegal in the state of Virginia. Many other forms of internet loans violate Virginia’s usury cap, because they aren’t exempted from the law. The VaPERL Coalition stands with Senator Merkley, and others who filed the 2013 SAFE Lending Act in order to combat internet lenders and others from shamelessly skirting state lending laws. Also on the horizon are bank payday loans, that while they are not yet here in Virginia, may pose a new more sinister threat to Virginia borrowers – control of their bank accounts without recourse. Current internet payday loans, internet installment loans, internet line of credit loans, and bank payday loan products all do or would violate Virginia law if made to Virginia residents. We applaud the efforts to give states who have serious lending laws the Federal support to enforce them. Read the press release on this issue by coalition member, the Virginia Poverty Law Center.

The SAFE Lending Act is a bill filed by U.S. Senators Merkley, Durbin, Blumenthal, and Udall and would ensure that all lenders are playing by the same rules by:

Requiring all online small-dollar lenders (such as payday lenders) to comply with state law if it provides better consumer protections than federal law;

Preventing banks from making payday loans in violation of the state law where the consumer resides;

Providing new federal enforcement measures to protect consumers from online payday lenders that seek to evade state consumer protection laws, such as by locating their businesses off-shore, or affiliating with a Native American Tribe and claiming the right to assert the tribe’s sovereign immunity; and

Empowering Native American Tribes to enlist the help of the CFPB where needed to protect their members from abusive payday lending on the reservation, and respecting tribal laws that provide stronger consumer protections than are available under state law.

The SAFE Lending Act would also protect consumers’ bank accounts by:

Closing the single payment loophole in the Electronic Fund Transfer Act and ensure that consumers have control over how lenders access their bank accounts for payment and collections of high-cost loans;

Safeguarding consumers’ personal information by banning “lead generators” who collect information like Social Security numbers, income and bank account information; and

Prohibiting lenders from using a borrower’s bank account numbers to create unsigned checks used to withdraw funds, even when consumers have opted out of making payments electronically.